Enduring Relief or Fleeting Respite? Bitcoin as a Hedge and Safe Haven for the US Dollar

33 Pages Posted: 12 Jan 2021

See all articles by Thomas Conlon

Thomas Conlon

University College Dublin

Shaen Corbet

Dublin City University ; University of Waikato - Management School

Richard McGee

Smurfit Business School

Date Written: January 4, 2021

Abstract

The hedging and safe haven properties of Bitcoin for the US dollar are investigated across a variety of investment horizons. Our findings reveal that (i) Bitcoin acts as a weak hedge for all currency pairs examined, with some evidence of negative average dependency for Euro, Swiss Franc and Japanese Yen rates, (ii) Bitcoin functions as a weak safe haven for the US dollar at short investment horizons, as indicated by a limited relationship during acute negative price movements, (iii) Bitcoin, instead of acting as a safe haven may, instead, increase aggregate risk at long horizons during periods of extreme losses. The analysis, performed using a series of horizon-dependent econometric tests for data including the COVID-19 crisis, provides evidence of some US dollar risk reduction benefits from Bitcoin, but limited potential for enduring relief from long-run extreme negative US dollar rate movements.

Keywords: Bitcoin, Currency, Hedge, Safe Haven, Wavelet, Quantile Coherency

JEL Classification: G10, G12

Suggested Citation

Conlon, Thomas and Corbet, Shaen and McGee, Richard, Enduring Relief or Fleeting Respite? Bitcoin as a Hedge and Safe Haven for the US Dollar (January 4, 2021). Available at SSRN: https://ssrn.com/abstract=3759579 or http://dx.doi.org/10.2139/ssrn.3759579

Thomas Conlon (Contact Author)

University College Dublin ( email )

Smurfit Graduate Business School
Blackrock
Co. Dublin, n/a
Ireland

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/drthomasconlon/

Shaen Corbet

Dublin City University ( email )

Dublin 9
Ireland

University of Waikato - Management School ( email )

Hamilton
New Zealand

Richard McGee

Smurfit Business School ( email )

Blackrock, Co. Dublin
Ireland

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